17 August 2015 | BRIDGE TO INDIA
The Indian Parliament recently concluded a literally washed out monsoon session. The key Amendments for Electricity Act 2003, which the Parliamentary Standing Committee had already recommended was ready but not tabled (refer here to read why this matters for the solar sector). Another important proposal to amend the National Tariff Policy 2005 has been severely watered down (refer here to read about its proposed impact on the solar sector).
- Amendments to the Electricity Act are ready but could not be introduced in the parliament.
- Dropping of the compulsory adherence clause in the amendment to the National Tariff Policy will undermine the impact of the reform.
- Written replies to questions raised by parliamentarians revealed several aspects of various government initiatives.
Amendments to the Electricity Act are the cornerstone – the legislation will reorder the regulatory landscape for the entire power sector in the country. This includes an enhancement of Renewable Purchase Obligation (RPO) targets, introduction of Renewable Generation Obligation (RGO) targets, penalties on RPO and RGO non-compliance, ease of doing business for renewable micro-grids for rural electrification and other, broader power sector reforms such as separation of content and carriage.
Amendments proposed for the National Tariff Policy 2005 originally had provisions to allow for cost-free interstate transmission of renewable power, procurement of bundled solar power by DISCOMs from conventional power generators on a cost plus basis, easy pass-through of RPO compliance cost and several other, larger tariff structure related reforms for the power sector. State regulatory commissions, however, claimed that several amendments were infringing upon the state rights. Subsequently, the government has dropped the compulsory adherence clause of the amendments, making it more of a guideline. BRIDGE TO INDIA believes that as a result, the impact of the reform will be undermined.
Interestingly, the written replies by the Ministry of New and Renewable Energy (MNRE) to questions asked by parliamentarians revealed a lot about the government’s thinking on solar. The government provided the latest breakup and timeline of the 100 GW target (refer, refer) and announced several plans to reduce the cost of financing for renewable projects (refer). It also provided clarity on various initiatives for achieving the 40 GW rooftop target solar plan and incentives (refer) and financial status of the National Clean Energy Fund (refer).
As the parliament session showed, the Indian political system has little appetite for big-bang reforms in the power sector. The central government is keen to drive change but it is dependent on state governments to come onboard. The treacherous issues of high transmission, distribution and commercial losses, including theft, and insolvent DISCOMs remain the weakest links in the sector.